Presumptive income and advance tax obligations

CA V.K. Subramani

The concept of paying advance tax is 'pay as you earn'. Which means the taxpayer can split his tax liability in four instalmets viz; 15% on or before 15th June; 45 % on or before 15th September; 75% on or before 15th December and 100% before 15th March of the previous year. Also, any tax paid before 31st March would be treated as advance tax which would help to restrict interest computation under section 234B.

In the case of persons opting presumptive provisions under sections 44AD and 44ADA there is no need to pay advance tax as detailed above. It is enough if the advance tax is paid before 15th March and there is no need to pay tax in preceding 3 instalments.

However, persons engaged in plying goods carriages on hire have to pay advance tax even where they opt to pay tax under section 44AE.

In the case of resident senior citizen there is no obligation to pay advance tax if the total income does not consist of income under the head 'Profits and gains from business or profession'.

Law permits the assessing officer to seek payment of advance tax by issuing an order under section 210(3) at any time before 1st March of the previous year. For this purpose, the AO may take the total income of the latest previous year in which the income was assessed to tax; or the total income admitted by the assessee for any previous year subsequent to the previous year for which regular assessment has been made.

If the assessee does not agree with the total income estimated by the AO, he must file Form 28A and pay advance tax as per the income declared by him therein. If agrees with the income estimation, he must pay tax as determined by the AO. Failure to pay advance tax would make the assessee deemed to be in default and liable for penalty under section 221 of the Act.

Payment of advance tax in instalments would apply even for assessees liable to pay tax under sections 115JB and 115JC. Also, where irregular incomes such as (i) capital gain;(ii) winning from lotteries, crossword puzzle, races, card games;(iii) income under the head PGBP arises for the first time; and (iv) dividend income, the advance tax has to be paid in the remaining instalments and where there is no such instalments due, by 31st March of the previous year.

If a taxpayer pays entire tax after the end of the previous year but omits to file the ITR, interest under section 234A for delay in filing ITR would not apply [CIT v. Dr. Prannoy Roy (2009) 309 ITR 231 (SC) : 2009 TaxPub(DT) 0859 (SC)].